Some Recent Buys and Thoughts of HLF

The main thesis that Ackman and everybody is screaming about is that HLF is a Ponzi scheme.

Couldn’t disagree more.

To keep this short and hopefully try not to introduce more “noise” into the mess already, Multi Level Marketing (MLM) is huge in Korea and Asia.

Some of my relatives are still involved in MLM to this day so I have heard my fair share of sales pitches, compensation schemes, lectures and other pitches. I helped deliver the goods myself.. lol.

Looking back, I can now understand the psychology aspect of why my relatives are so into MLM. The main point I want to bring up is that they really love the product and not to make a living out of it.

Are Herbalife’s shakes and pills overpriced? Yes to those who do not take the stuff. No to those who are loyal to the brand and the product.

Where does that loyalty come from? The best form of marketing, word of mouth. Especially through the mouths of people they love and trust. It’s virtually unbreakable.

I did not spend 18 months analyzing HLF, and Ackman is not wrong on everything, but it seems like Ackman is falling into backfiring and skill bias.

Backfiring bias: When presented with information that goes against your viewpoints, you not only reject challengers, but double down on your original view.

Skill bias: When education and training causes confidence to increase faster than ability.

Long AAPL

I’ve started to build a perverse nature of trying to find bad articles on companies I want to buy.

I don’t buy into the whole argument that just because you can’t see where AAPL will be 10 years from now, it is speculation.

Ultimately, the success of any investment is judged on the price you pay.

NOK at $1.70 was a good investment or trade. Even GRPN at $2.70 may be a good investment.

The thing that many value investors misinterpret is that such a “trade” is speculation and not an investment. In real estate, there is nothing wrong with buying a beaten down home and flipping it a few months later.

In my books, an investment is one where your primary goal is to make money on calculated risk.

So while others were debating whether AAPL is an investment or speculation, I went ahead and bought myself some apples.

5 responses to “I Bought HLF and AAPL”

Apple’s competitive advantage is differentiation. They also pursue technological leadership. To achieve differentiation they are heavily reliant on first mover advantages. With the time between big impact products growing competitors have closed the gap on differentiation. Samsung phones and tablets, Blackberry’s phone are now just as good as Apple if not better. Tim Cook has not shown he can get new products out quickly and in this situation the company in the technological follower ship position, Samsung, is way more attractive than Apple. Apple is starting to look like a value trap

I will not long HLF and I will not short it. Even if I can make money out of it (by shorting it on the day after Icahn’s 13F crazy shot up, and I’ll be right – as of today). Herbalife business is preying on weak financial intelligence people, most people in developing or third world country will believe they can make a living by working 2 hours/day, selling some products and “built a business” for themselves and able to give it to their next generation…. We all know that’s a lie but these people really believe it and so they believe the products are good for their health while did not know the same “holy” soy dietary powder shake are no different from each other.

The same goes to life saving insurance, Asians love it, the greatest thing happen in their life is when they bought the saving insurance. Americans used to love it 50 years ago, now not so much, we all know that’s a scam. But company like AIA, NY Life, Jackson Group…Still doing wonderfully in Asia

“Buy stock as you buy a business, if you are not prepare to own it for 10 years, do not own it for 10 minutes” – A famous investor

With respect to the “business opportunity” for HLF, you’ve nailed the misconception of people who have never done MLM and those that are more financially intelligent. It’s the classic number one response.

The people who think its a get rich quick scheme realize that it requires hard work and give up. They then go off searching for the next get rich quick idea.

It’s a lot like blogging. Most people start thinking they just have to write an article and it will go viral and their blog will become famous. This thinking doesn’t last long.

The second point is about the product. The truth is that the entire supplements industry could be viewed as a scam. Green tea pills to boost metabolism. Is it really needed? Nope. But people are lazy and nothing will change that. So if HLF wants to be in such an industry and offer a health clinic where people can feel better about themselves as they drink their protein shakes with other people, I don’t have anything against that.

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